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The Skinny on Minimum Essential Coverage Plans: Are They Right for You?

Minimum Essential Coverage (MEC) plans or “skinny plans” may not be new, but they’re making news.

In fact, 16 percent of large employers intend to offer one in 2015. These limited protection coverage plans have both pros and cons. How do you know if a MEC plan could be an option for you?

MEC plans generally cover preventive and wellness-related tests and treatments. While they meet certain requirements outlined under the Affordable Care Act (ACA) and ERISA, they are not what most think of as traditional health insurance. Historically, these kinds of bare bones coverage plans have been offered by restaurant chains, hotels, retailers and other lower-wage industries.

Many had speculated that MEC plans might go the way of the dinosaurs under health care reform law. Not so. According to a recent survey conducted by the nonprofit National Business Group on Health, 16 percent of large employers intend to offer at least one lower-benefit “skinny plan” selection in 2015 in conjunction with at least one health plan that does qualify under ACA standards. That means almost one in six companies will offer coverage that doesn't meet minimum value and affordability standards set forth by the ACA.

The survey also found that employers are implementing consumer-directed health plans, expanding wellness initiatives, increasing employee cost-sharing and imposing some sort of spousal surcharge.

MEC plans offer certain advantages and disadvantages for both employers and employees. While less expensive, this kind of coverage option offers limited protection and isn’t for everyone. Here are some of the pros and cons to consider.

MEC Plans Can Offer Significant Advantages.

Businesses with more than 50 employees that provide these plans to their workforce beginning January 1, 2015, satisfy one portion of the ACA’s large employer mandate and avoid paying a $2,000 assessment per full-time employee for not meeting the minimum essential coverage employer requirement. In addition, the employer contribution is tax deductible.

MEC Plans Can Save Employers Costs Related to Benefits.

Because they offer minimal coverage, the cost is less than traditional group health insurance. The premiums can be paid by the employer, the employee or co-funded.

The Devil Is in the Details.

While MEC plans eliminate the $2,000 per employee penalty, employers should be aware that these plans do not protect them from the ACA’s $3,000 penalty per each employee who goes to a public exchange and qualifies for a federal subsidy.

Also, because MEC plans offer only the most basic level of benefits required under ERISA, they might be viewed unfavorably by employees unless combined with other policies. For companies considering a MEC plan, OneDigital often recommends combining it with a limited medical plan. This combination provides additional, restricted coverage for routine doctor visits and hospitalization. Again, this is not traditional health insurance. However, when wrapped together, these policies are more appealing to the workforce and much more affordable than standard indemnity health plans.

MEC Plans Are Not a Solution for Every Employer.

New ACA regulations create enormous challenges for companies with more than 50 employees that traditionally have not funded group health benefits for a large percentage of workers. They may face financial burdens or workforce decisions due to changes that are effective January 1, 2015. Many of these businesses have a large contingent of part-time, hourly employees. With full-time employment status being lowered to 30 hours a week, MEC plans could be a viable solution for certain industries that have low-wage, high turnover staffs—including convenience stores, retail, restaurants, staffing companies, nursing homes, home health care, hotels and resorts/casinos and security companies.

For more information, talk to your OneDigital advisor or consultant.


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